Michigan Court of Appeals Addresses Appellate Issues Relating to Necessity Challenges

The Michigan Court of Appeals held that agencies appealing a denial of necessity must seek leave and do not enjoy a right to appeal but limited successful property owner attorney fee reimbursement in limited instances. 

The Michigan Court of Appeals recently issued Consumers Energy Co v Storm, which is a decision for publication relating to a successful necessity challenge.

“Plaintiff sought an easement on defendants’ property that would stretch 80 feet from plaintiff's powerline onto defendants’ property, and would allow plaintiff to enter defendants’ property as necessary to maintain the powerline and to manage vegetation on the property that could threaten the line.” The property owners successfully challenged necessity.

The first issue involved whether Consumers Energy properly appealed the circuit court’s denial of necessity. MCL 213.56(6) creates the standard of review for private agency necessity challenges: “An order of the court upholding or determining public necessity or upholding the validity of the condemnation proceeding is appealable to the court of appeals only by leave of that court pursuant to the general court rules. In the absence of a timely filed appeal of the order, an appeal shall not be granted and the order is not appealable as part of an appeal from a judgment as to just compensation.” The Court of Appeals delved deeply into the rules for statutory construction and very closely parsed the language of the statute. It rejected Consumers’ contention that the restriction of appellate rights found in this statute “applies only to trial court orders that reject a property owner's motion to review necessity and confirm that necessity exists” and applied the statute equally to agencies. Since Consumers did not file an application for leave to appeal, substantive review of the trial court’s necessity ruling was denied.  

This ruling is positive for property owners. It applies equally to both public and private agencies and forces them to endure the same restriction on appellate review as property owners. 

However, the Court of Appeals struck a blow against owners by denying attorney fee reimbursement in this case.  

MCL 213.56 addresses necessity challenges in formal condemnation cases. It identifies different standards for challenging necessity depending upon whether the agency is private, like Consumers Energy, ITC, or pipeline companies, or public, like a city, drain commissioner, or road commissioner. MCL 213.56(2) establishes the standard for challenging necessity by a private agency. “Except as otherwise provided in this section, with respect to an acquisition by a private agency, the court at the hearing shall determine the public necessity of the acquisition of the particular parcel.”

MCL 213.66(2) authorizes reimbursement of attorney fees. “If the property owner, by motion to review necessity or otherwise, successfully challenges the agency's right to acquire the property, or the legal sufficiency of the proceedings, and the court finds the proposed acquisition improper, the court shall order the agency to reimburse the owner for actual reasonable attorney fees and other expenses incurred in defending against the improper acquisition.” 

The Court of Appeals read MCL 213.66(2) to create a two-part inquiry. “A property owner requesting attorney fees under MCL 213.66(2) must satisfy two prongs: (1) the property owner must successfully challenge the agency's right to acquire the property or the legal sufficiency of the proceedings, and (2) the court must find the proposed acquisition improper.” It then noted that “the trial court placed the burden of proving the necessity of the acquisition on plaintiff.” Therefore, the Court of Appeals concluded that the trial court’s “ruling in defendants’ favor was a finding that plaintiff failed to carry its burden. That is, the trial court's ruling was not akin to a finding that defendants proved that plaintiff's proposed acquisition was not necessary, and thus the ruling could not be a per se finding that the acquisition was improper. The trial court's ruling in defendants’ favor was a finding that plaintiff failed to carry its burden, nothing more.”  For that reason, the second prong of the test was not met. 

This is a rather surprising ruling. Even the Court of Appeals acknowledged that it “may be ‘inconsistent with the purpose of the fee-shifting’ statute as defendants suggest, it is nonetheless consistent with the plain statutory language. The plain language of a statute is not trumped by ‘the perceived purpose of the statute.’”

This limitation on attorney fee reimbursement would not appear to apply to challenges to the jurisdiction of the trial court caused by failure to comply with the good faith offer requirements. It would not appear to apply to successful challenges to necessity in cases filed by public agencies since to prevail in those instances a property owner must affirmatively make “a showing of fraud, error of law, or abuse of discretion” pursuant to MCL 213.66(2). It would also not appear to apply to rulings affirmatively finding a lack of necessity instead of rulings finding that the agency failed to meet a burden. 

Consumers Power has sought leave to appeal from the Michigan Supreme Court. The Supreme Court’s involvement could be very interesting. For example, the Supreme Court could uphold or reverse either of the two discreet rulings, converting this split decision to a total victory for either agencies or owners. If it allowed Consumers Power to pursue the substance of its appeal, that would result in an evaluation of the substance of the necessity challenge. The circuit court’s finding of no necessity for a vegetation management easement intruding 80 feet into a property would assist property owners challenging typical private agency electrical transmission line easements since this distance from the centerline is close to what is often sought. If the Supreme Court allowed Consumer’s appeal on procedural grounds but then ultimately denied the challenge on the substance, it could impact the breadth of many utility easements that are commonly acquired.

I have handled many utility cases, including challenges to necessity and jurisdiction. Please feel free to contact me if you have any questions.